Verizon Earnings: New Vision Points to Capital Discipline With a Commitment to the Dividend

Key Morningstar Metrics for Verizon Communications

• Fair Value Estimate: $53.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Medium

What We Thought of Verizon Communications’ Earnings

Verizon Communications VZ reported decelerating growth in the third quarter, with service revenue up only 0.8% year over year. Wireless customer additions remained weak, while competitive intensity weighed on revenue per customer. New CEO Dan Schulman outlined his plans, including a commitment to the dividend.

Why it matters: We don’t believe Verizon can outgrow its smaller rivals, AT&T and T-Mobile, given the parity among the firms. Schulman disagrees, but we were happy to hear that he doesn’t plan to increase promotions, noting that these only help in the short term.

• We agree that Verizon has pushed too hard on price increases, causing it to lose market share faster than it otherwise would. The current pace of postpaid phone customer defections, or churn, is unacceptable, at levels not seen in more than a decade, when the industry was less consolidated.
• While we appreciate Verizon’s effort to lead industry pricing higher, we expect the firm to shift its focus to more consistent pricing, lessening the need to use giveaways and other promos to retain customers on higher-price plans, which clearly isn’t resonating.

The bottom line: We don’t expect to materially change our $53 per share fair value estimate, as our long-term view of Verizon remains the same. The path the firm takes might change, but we still expect it will end up with market share comparable with that of its two wireless rivals.

• Our narrow moat ratings for Verizon, AT&T, and T-Mobile rest on our belief that competition will remain rational, as no firm can gain in the long run through efforts to price aggressively or invest heavily. Rivals can quickly mirror these moves before market share moves meaningfully.
• Schulman spoke at length about gaining efficiencies and rationalizing network investments, indicating that capital spending will fall in 2026. He also expects free cash flow to be higher next year. We like this shift. The cash flow outlook alleviates concerns that Verizon will radically change pricing.